Fuel prices set for fur­ther cuts

Global mar­ket weak­ness could lead to fur­ther re­duc­tions, say in­dus­try ex­perts

China Daily (Canada) - - BUSINESS - By DUJUAN dujuan@chi­nadaily.com.cn

Re­tail fuel prices are ex­pected to be cut for a ninth con­sec­u­tive time since July on Satur­day as the gov­ern­ment re­acts to de­clin­ing in­ter­na­tional crude prices, in­dus­try sources said on Thurs­day.

Re­tail gaso­line prices will drop 190 yuan ($30) a metric ton and diesel prices will fall 210 yuan a ton, ac­cord­ing to Shan­dong-based Longzhong In­for­ma­tion Tech­nol­ogy Co.

Un­der the na­tion’s oil price adjustment mech­a­nism, which calls for changes when in­ter­na­tional bench­mark crude oil prices fluc­tu­ate by a cer­tain range over a set pe­riod, the Na­tional De­vel­op­ment and Re­form Com­mis­sion is sched­uled to an­nounce cuts late on Fri­day.

On­go­ing crude oil price de­clines have had a “se­vere ef­fect” on China’s oil and petro­chem­i­cal in­dus­tries, said Li Yan, an oil an­a­lyst with Longzhong.

“Most do­mes­tic traders have noth­ing to do at the mo­ment be­cause of the ex­tremely weak mar­ket,” he said. “Some medium-sized and small com­pa­nies may have to shut down.”

One bench­mark crude — Brent light, from theNorthSea — has dropped from $115.06 a bar­rel in June to $78.50 a bar­rel this week, a de­cline of more than 30 per­cent.

The Or­ga­ni­za­tion of­Petroleum Ex­port­ing Coun­tries, which ac­counts for two-thirds of the world’s oil re­serves and out­put, and sup­plies more than 40 per­cent of global con­sump­tion, was sched­uled to meet on Thurs­day in Vi­enna to dis­cuss a pro­duc­tion cut.

Li said that Saudi Ara­bia, the big­gest pro­ducer in OPEC, is the key player in any pos­si­ble out­put cut, but the coun­try has not made its stance clear yet be­cause it still can sur­vive in the cur­rent low price cli­mate.

The goal of OPEC is to

CHANGES IN RE­TAIL FUEL PRICES main­tain sta­bil­ity in world oil prices and en­sure each mem­ber’s mar­ket share, which means the or­ga­ni­za­tion will not cut pro­duc­tion on a large scale, said Li.

“A large out­put re­duc­tion will cause a re­bound in in­ter­na­tional crude prices, which in turn will stim­u­late shale out­put from the United States,” he said. “Com­pe­ti­tion from the US against OPEC, in­clud­ing Saudi Ara­bia, is not what they want to see.”

Liang Dan, a se­nior an­a­lyst at ICIS C1 En­ergy, a Shang­haibased en­ergy con­sul­tancy, said that a small OPEC cut would not ease the glut in the world crude mar­ket.

For in­stance, cold weather has led to higher uti­liza­tion of re­fin­ery ca­pac­ity in the US, but that did not help the in­ter­na­tional oil mar­ket much, Liang said. The weak global econ­omy is the pri­mary cause for fall­ing crude prices.

She fore­cast that

China would cut re­tail prices yet again next month, for the 10th time in a row.

Lin Bo­qiang, di­rec­tor of the China Cen­ter for En­ergy Eco­nomic Re­search at Xi­a­men Univer­sity, said China should take ad­van­tage of fall­ing crude prices to build up its strate­gic oil re­serves.

He said China’s crude re­serves are still far from the level of de­vel­oped coun­tries.

Ac­cord­ing to Longzhong’s data, China can save about $20 bil­lion to $30 bil­lion a year on crude im­ports if in­ter­na­tional prices drop.

Newspapers in English

Newspapers from China

© PressReader. All rights reserved.